Eskom Presentation Standing Committee on Appropriations

Transcription

1 Eskom Presentation Standing Committee on Appropriations 12 June 2015

2 Contents Content 1. Introduction 2. Financial situation 3. Eliminating Load shedding 2

3 Executive summary (1 of 2) Eskom is a fully integrated power utility (generation, transmission, distribution and wholesale/retail) that supplies 95% of SA s electricity and fourth largest in the world in terms of installed capacity We are well-governed with a Shareholder, functioning Board and EXCO and more than employees Eskom s Labour Relations has matured over time and since 1998, Eskom has never had a strike except for isolated localized incidents of work-stoppages (in 2010 and in 2013 both in support of the wage demands). We are currently undertaking a R280 bn capex programme over 5 years and building two of the biggest coal fired power plants in Africa Since 2001 we added 32 generating units increasing a number of current units to 121 Medupi Unit 6 has been synchronised and Sere Wind farm (100 MW) is completed. Delays in new build has primarily been caused by our contractors through strikes or technical non-performance

4 Executive summary (2 of 2) We have a maintenance backlog and this has led to deteriorating power station availability and subsequent load shedding. We need a minimum of 3000 MW and maximum of 5000 MW capacity either through supply-side or demand-side options within 18 to 24 months and avoid load-shedding At Stage 1 load-shedding we still supply 96% of the required demand. At stage 2 it is 94% of required demand We have added about 160, 000 new electrification customers in the last financial year In Distribution side we have sustainably reduced the duration of customer interruptions over the last three years by close to 10 hours per annum Eskom is finalising a turnaround strategy addressing its financial strength, operational excellence and new build delivery A strong and sustainable Eskom is required to ensure a sustainable economy

5 The Capital Portfolio is made up of almost 8000 projects costing R280bn over 5 years... The main drivers of the CAPEX requirements are: New build / new capacity (R159bn) Major overhauls that are capitalized (R29bn) Refurbishment and replacements (R63bn) Customer connections (R10bn) Compliance (legal, regulatory, safety, environmental) R19bn

6 Contents Content 1. Introduction 2. Financial situation 3. Eliminating Load shedding 6

7 Finance situation Eskom is going through an intensive capital investment phase Eskom will remain liquid in the Financial year At minimum, Eskom must break-even in the current financial year which will require a close monitoring of expenditure as well as improved sales and collections from customers to minimise impairment of revenue We are pursuing a maintenance strategy without load shedding The New Build Programme is expected to deliver 3 units in the current financial year from Medupi (one unit) and Ingula (two units) 7

8 Eskom is funded through various sources Equity: Funding injected by the Shareholder Revenue: Funds received through sale of electricity per Tariffs determined by the NERSA Debt: Raised through Local & international markets from a variety of lenders Debt and equity financing is mainly utilised to close the gap where there is a short-fall from revenue funding 8

9 Eskom is in a capex intensive phase this is cyclical ILLUSTRATIVE Eskom's net cash balance Eskom Early Years And Early 1980 Investment phase Significant investment into new power plants 1990ies Cash-out phase Almost no new build Oversupply and cheap electricity Investment phase Tight supply Increasing tariff to fund new build Beyond 2018 Cash Positive Repayment of debt Planning for the next phase CONFIDENTIAL 9

10 Cash flows for FY2016 indicate a closing balance of R15.7 bn Cash flows for FY2016 R Million Key insights The R23 bn equity injection will be used to fund CAPEX Gearing will improve from 75% to 67% with the conversion of the subordinated loan and the R23bn equity injection 10

11 Eskom plans to raise a total of R55 bn of debt securities for FY2016 Debt securities R Million Eskom bonds DFI and other loans Export credit facilities International bonds Commercial paper DBSA Total debt securities raised

12 The total Capital Expenditure for the year is R60bn with new builds contributing over 40 % of the expenditure Capital expenditure R Million Capital expansion R Million - Medupi Kusile Ingula Transmission Other Total capital expansion Generation Transmission 959 Distribution Future fuel (coal) Other project related expenses Asset purchases Total Insights It is critical that each division keeps within the Capital allocations Deviations from the allocated capital expenditure will have an impact on Eskom s financial health and sustainability 12

13 Capital projects are on track with Medupi unit 6 commercial operation expected in Q3 of 2015 Project Medupi unit 6: Kusile Project: Description Continue to ramp up to full commercial operation. Full Load planned for the 2nd quarter of 2015, and CO (Hand-over to Generation) during the 3rd quarter of Unit 1 Boiler Re-heater hydrostatic test was successfully executed per the acceptance criteria on 12 April Balance of Plant items is progressing The 100MW Sere Wind Farm our first utility-scale renewable energy project, was put into commercial operation on 31 March 2015 Transmission Projects Majuba Rail We have 48 active schemes contributing to 14,415 MVA of transformer capacity and 4,397km to the network at completion. Financial year we achieved kms of line built and 2,090 MVA transformation capacity built. 1st commercial train expected in the 2nd quarter of Other Projects: Progress is being made on PV rollout at power stations and administration buildings for selfconsumption, with a Solar PV plant Future Build Plans including Nuclear: Source: Team analysis Future build falls under the Minister of Energy. The Cabinet approved IRP 2010 however provides for 9,600 Megawatts of electricity to be generated through nuclear power, with the first unit commissioned by

14 Eskom needs to ensure capital is available to ensure delivery of one Medupi and two Ingula units for FY16 xx MW added to the network Post MYPD3 Commissioned in early Feb 2015 Additional 100MW added to the network First sync Mar 2015 Full stable power by Jun 2015 Unit 4 to be commissioned Apr 2016 Unit 1 to be commissioned Aug 2016 Kusile 1 will be commercially operating Aug / MW Feb 2015 Sere Wind Farm Aug 2015 Medupi Unit Mar 2016 Ingula Unit Jul 2016 Ingula Unit Aug 2017 Kusile 1 Medupi x1 unit Ingula x2 units Total MW 5532 Mar 2015 Majuba Recovery Jan 2016 Ingula Unit 3 May 2016 Ingula Unit 2 Sep 2017 Medupi /2020 Duvha 3 Recovery MW from unit 3 gap solution in Feb & 600MW from Unit 4 in Mar 2015 Unit 3 to be commissioned Jan 2016 Unit 2 to be commissioned May 2016 Medupi 5 commercial operation date is Sep 2017 Duvha 3 will be fully recovered in 2019/2020 This project falls out of MYPD3 window Source: GCD, Team analysis 14

15 Principles of electricity prepayment There are key benefits that can be derived from maximizing prepayment across all the customer groupings, these include: Improved cash flows as a once-off benefit Improve most balance sheet ratios Interest free borrowing mechanism Reduces long term debt Increases short term debt SOURCE: Team analysis 14

16 Contents Content 1. Introduction 2. Financial situation 3. Eliminating Load shedding 16

17 5 May 2015 Stage 1 load shedding was implemented during evening peak due to a 2180MW shortfall Available capacity vs peak demand for 5 May 2015 Key Insights MW 45,000 40,000 43,500 Type Number of stations Number of units Nominal capacity (MW) Coal-fired % 35,000 30,000 25,000 20,000 15,000 32,180 Hydro electric Pumped storage Nuclear Gas Imports ,000 5,000 Total nominal capacity Available Capacity Peak demand SOURCE: National Control 17

18 5 May 2015 Stage 1 load shedding was implemented during evening peak due to a 2180MW shortfall Available capacity vs peak demand for 5 May 2015 MW 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, ,500 Available Capacity Available Planned Available Unplanned capacity maintenance This resulted during is in a capacity during maintenance peak currently shortfall is at of peak is is currently 30200MW 6500MW 2180MW ~30200MW at 7000MW 32,180 We have 6000MW at Risk of Breaking down Peak demand Key Insights Installed capacity is 43500MW Peak demand for Tuesday 5 May 2015 was 32180MW Planned maintenance is currently at 6500MW Unplanned maintenance is currently at 7000MW To complete sufficient maintenance, deficit between demand and capacity should not exceed 4500MW Available capacity during peak is ~30200MW This resulted in a shortfall of 2180MW The shortfall was reduced through the use of Pot lines (680MW) The remaining shortfall of 1500MW resulted in stage 1 load shedding SOURCE: National Control 18

19 5 May 2015 Stage 1 load shedding was implemented during evening peak due to a 2180MW shortfall Available capacity vs peak demand for 5 May 2015 Key Insights MW 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Planned maintenance is currently at 6500MW 43,500 Available Capacity Unplanned maintenance is currently at 7000MW We have 6000MW at Risk of Breaking down Available capacity during peak is ~30200MW 32,180 Peak demand This resulted in a shortfall of 2180MW Installed capacity is 43500MW Peak demand for Tuesday 5 May 2015 was 32180MW Planned maintenance is currently at 6500MW Unplanned maintenance is currently at 7000MW To complete sufficient maintenance, deficit between demand and capacity should not exceed 4500MW Available capacity during peak is ~30200MW This resulted in a shortfall of 2180MW The shortfall was reduced through the use of Pot lines (680MW) The remaining shortfall of 1500MW resulted in stage 1 load shedding SOURCE: National Control 19

20 The strategy is to do maintenance without load shedding Available capacity vs peak demand MW 45,000 43,500 40,000 35,000 30,000 25,000 Maintenance Budget < = 9,500 33,000 1,000 Key Insights Maintenance Budget < = Available capacity Daily Peak Demand + Operating Reserves 20,000 15,000 10,000 5,000 0 Available Capacity Peak demand SOURCE: National Control 20 20

21 Eskom needs to prioritise risk maintenance to ensure sufficient capacity is available for philosophy maintenance Planned maintenance Philosophy maintenance Safety maintenance Statutory maintenance Maintenance Unplanned maintenance Risk maintenance Breakdowns (Total and partial load losses) Maintenance = Philosophy + safety + statutory + risk + breakdowns In the short term, Eskom will prioritise RISK MAINTENANCE in order to reduce the amount of unplanned maintenance On average Eskom has a maintenance budget of 9500MW, this is dependent on demand requirements SOURCE: Generation 11

22 Contents Content 1. Introduction 2. Corporate governance 3. Financial situation 4. Eliminating Load shedding 22

23 Thank you 23